When you buy your primary residence, you experience a great feeling, a real sense of accomplishment, and as you make improvements, you take more and more pride in your home. It’s a wonderful place to live, customized enough to please your tastes and serve plenty of useful function. It’s also in a terrific location, giving you an acceptable commute, and you smile when you think about its appreciation value.
This is certainly a long-lasting effect, and, it can be one that leads you to start think more and more seriously about purchasing a second home. A vacation property that serves as a dedicated place to stay, and, what’s more, to deliver a passive income stream, from renting when you’re not in town. Then, you begin to consider the tax benefits, the fact that owning such an asset gives you more financial stability, and, will substantially add to your portfolio as it appreciates. Now, there’s more than just a dream, there’s a real temptation, and who could blame you for wanting all the wonderful benefits?
What to Know before Buying a Vacation Home
Purchasing a second home, even one that one that will serve as a vacation rental property you can lease out to vacationers, is a very big step. What all too many investors do, is not become educated enough about their potential property picks, and allow their enthusiasm to cloud their judgment. They rationalize this and that, only to buy many years of remorse. What’s worse, they don’t truly enjoy their home away from home.
“Most people are misled by a beautifully-decorated home and don’t look past the surface. When it comes to purchasing a vacation home, people tend to be less discerning about the property and less likely to look at the practical considerations that are the focus of buying a primary residence. I’m convinced that people looking for a second home are in a less critical state. They don’t have a practical head on their shoulders.” —FOX News
To find the right vacation property, you’ve first got to know the area — really becoming intimately familiar with the locality. This will take a lot of online research, accompanied by several visits, at different times during the year. What is a quaint location in one season could well be something altogether different in another. Understanding the true costs is another important part of the learning curve. Remember, the cost of living in one city might be completely different from another. Consider distance, because it can’t be ignored — a full 80 percent of satisfied vacation home owners have primary residences that are a short drive away. If you buy something that’s 2 hours or more away, use will dramatically drop and you won’t get there nearly as often as you like. In addition to these, you ought to fully understand the vacation rental market in that particular area, it might not be as strong as you believe.
Avoid these Vacation Home Buying Mistakes
Just as there are things you definitely need to do before you pare down and commit to tendering a purchase offer, there are other things you ought to avoid. It’s easy to make costly and frustrating mistakes which undermine the whole purpose of buying a vacation home, such as the following:
- Not learning local landlord-tenant law. From the local municipality to the homeowners association — if there is one — you’ll need to become familiar with landlord-tenant law, as well as regulations governing short-term rentals. This can be a huge gotcha that springs from out of nowhere, if you aren’t careful. You could find that all your plans are for naught when it’s too late.
- Picking the wrong property management company. Sure, one service may charge the least and has been doing business for quite some time. While those are good qualifiers, they simply are not enough. Look deeply into each perspective service and compare and contrast to make the best choice.
- Paying more for the sake of cosmetics. Homes that are updated, have great looking decor and furniture, and are in good condition present very well. Such appointments mean that you might be lulled into making a choice that actually more expensive than one which only needs minor updates.
- Purchasing a home that’s too “you.” Of course, you will own this home, and that sense of pride can lead you into making the mistake of purchasing something that’s just too much your individual taste. If you plan to rent it out, it must have a broad appeal, or, it won’t attract vacationers like your local competition.
One more thing to avoid is to believe owning a vacation home, especially one you won’t rent out, is going to be a without problems. Just like your primary residence, you ought to be discerning and choose a home that’s in good shape, and does not need significant repairs and/or updates.